Before Trump and Xi Meeting, Washington Studies New Tariffs on China

President Donald Trump is moving toward imposing new tariffs on China, to punish the world's second-largest economy for flooding global markets with low-priced goods, according to three sources familiar with the matter, speaking to the Associated Press.

Two of the sources, who spoke to the agency on condition of anonymity to discuss ongoing internal deliberations, said Trump is considering setting the new tariffs at 7.5%.

U.S. administration officials believe this level of tariffs would not jeopardize the one-year trade truce recently brokered between Washington and Beijing, or the upcoming meeting scheduled at the White House between Trump and Chinese President Xi Jinping in late September.

The Associated Press reported that if enacted, this step would appear to be a calculated effort by the White House to circumvent a Supreme Court decision earlier this year that struck down Trump’s plan to impose a comprehensive system of high tariffs—something not seen in the U.S. since the 1930s.

Following that ruling, the Trump administration announced in March the opening of formal investigations targeting excess industrial capacity and forced labor practices in China and other countries.

It remains unclear whether the U.S. administration is also nearing a decision on its investigations into other economies it has declared are engaging in unfair trade practices, including the European Union, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, South Korea, Vietnam, Taiwan, Bangladesh, Mexico, Japan, and India.

The agency reported that the White House and the Office of the U.S. Trade Representative did not respond to requests for comment on the tariff deliberations cited by Bloomberg earlier Monday.

The Chinese Embassy in Washington stated in a statement that economic and trade issues should be resolved through bilateral talks rather than unilateral actions such as imposing tariffs, and denied having an issue related to excess production capacity.

The investigation into China’s excess industrial capacity began under Section 301 of the 1974 Trade Act, which allows the U.S. president to impose tariffs on countries that discriminate against American companies or trade.

New Tariffs

According to the sources familiar with the deliberations, the Associated Press reported, “Trump still has the ability to change his mind about the new tariffs on China.”

The new tariffs would be imposed in addition to existing tariffs ranging from 10% to 12.5% announced last month by the U.S. administration on 60 economies worldwide, which the Trump administration accused of failing to effectively enforce bans on goods produced using forced labor.

Several countries, including China, have objected to this move, which took effect as the deadline for temporary tariffs that Trump had relied on expired after the Supreme Court invalidated his broad “reciprocal” tariff system in February.

Last month, China responded to allegations regarding excess production capacity, just as it anticipated the U.S. would soon announce the findings of its investigation and impose new tariffs.

China’s massive production capacities across various industries—from automobiles to solar panels, cement, and steel—have drawn increasing concern from Beijing’s trading partners in recent years.

Despite Chinese leaders prioritizing economic rebalancing, slowing domestic demand has pushed companies to expand into foreign markets. This export boom has driven China’s trade surplus to a record level of nearly $1.2 trillion last year.

Excess Production Capacity

In a recent report titled "China's Position on the So-Called Excess Production Capacity Issue," the Chinese Ministry of Commerce stated that China has never sought a large trade surplus.

These deliberations come as the U.S. Treasury Department warned on Monday countries engaged in trade with Iran that new secondary sanctions are being prepared, aimed at isolating nations continuing business with Tehran. China is Iran’s largest trading partner.

Washington pledged to impose these new sanctions to increase pressure on Iran’s economy, already strained by previous sanctions and the U.S. maritime blockade, as Iran’s war approaches its sixth month.

U.S. Treasury Secretary Scott Bessent provided no specific details in his Monday announcement, nor did he identify which countries might face secondary sanctions.

A spokesperson for China’s Foreign Ministry said Tuesday, in response to questions about the new U.S. sanctions on Iran, that Beijing’s cooperation with Tehran "is conducted within the framework of international law and should not be interfered with or obstructed." The official added during a press briefing that "China is closely monitoring developments and will take all necessary measures resolutely to protect its rights and interests."